Grocers trying out digital coupons

January 14, 2008 7:56:25 AM PST

By DAN SEWELL AP Business Writer

CINCINNATI (AP) - January 14, 2008 --

Some coupon users are clicking instead of clipping these days to get their grocery discounts.upermarket chains are trying out paperless, or digital, coupons, to help the thrifty-minded save time while saving money. Shoppers load the online discounts onto their store loyalty cards, receiving the credit at the checkout.

Grocers see the innovation as a way to build customer loyalty, drawing consumers who are increasingly spending time online to their Web sites and ultimately, their stores. The move could increase coupon use by attracting shoppers who don't bother with paper coupons. It offers convenience for the companies in reducing handling, tallying and shipping of coupons, as well as cutting paper use.

Kroger Co., the nation's largest traditional grocery chain, and Procter & Gamble Co., the largest consumer products company, are partners in a digital coupon trial that began last month. Other supermarket companies around the country have been trying out ways to offer digital discounts in addition to the traditional clip-outs from newspapers and mailings.

Although online coupons for ordering everything from DVDs to laptops on the Internet have been around for several years, couponing, especially for groceries, is still dominated by paper. Digital use by companies with the combined reach of Cincinnati-based P&G and Kroger could help transform habits.

Some early users like the convenience of paperless coupons. "You don't have to waste your time going through all those little pieces of paper in your purse," said Carol Hoffman, a Covington, Ky., woman who's been using digital coupons on her Kroger card.

"It's really nice, because I always forget to bring my coupons along ... and I don't have to organize them," said Therese Sangermano, a Cincinnati mother of three who's been using the paperless coupons to save on P&G products such as Pampers diapers and Dawn dishwashing liquid.

The digital coupons, which are posted on the grocers' Web sites, can't be doubled, but expiration dates still apply. Selections are limited during the initial trials but companies expect to expand digital offerings soon.

Giant Eagle, a Pittsburgh-based regional chain, in November launched "E-offers," allowing customers to load coupons for 20-plus products, including national brands such as Minute Maid orange juice and Kellogg's cereal, to their loyalty cards. Giant Eagle spokesman Dan Donovan said it plans to expand paperless coupons as customers become familiar with the program.

Coupons for groceries date to the late 19th century, and industry experts say the majority of American households still regularly use them. Combing through Sunday newspaper coupons is still a ritual in some homes, and a scene in the "The Sopranos" TV series found Paulie "Walnuts" Gualtieri clipping coupons, showing that even mobsters used to flashing wads of $100 bills like to get their 50-cent discounts.

Annual savings is estimated nationally at about $3 billion, but that's only a small percentage of potential savings from unused coupons, according to industry estimates of redemption rates as low as 1 percent.

"It's great to see the innovation and I'm happy to see two big players taking a lead in that," Peter Meyers, vice president of the Toronto-based marketing firm ICOM Information & Communications L.P., said of the Kroger-P&G trial. But he said it might take awhile for digital coupons to take off among grocery shoppers.

"If you're very computer savvy, this is probably a plus," he said. "But if you're more of a traditionalist, paper is familiar and this is not."

Meyers said the early grocery efforts have room for improvement. Shoppers still have to invest time looking through the online coupons to pick the ones they want.

Ken Fenyo, Kroger's vice president for corporate loyalty, said Kroger means to complement traditional paper coupons, but expects to expand its current pilot program as part of its recently overhauled Web site.

"We really are just trying to provide more options, not take things away," he said. "We know many of our customers are online heavily anyway. I believe over time, more and more customers will want to use the online option."

Some grocers are also offering in-store paperless coupons. Chicago-based Unicous Marketing Inc. said regional chains, such as Springfield, Mass.-based Big Y, are trying its EZ-PIC program in which "instant coupons" are advertised on store shelves and cut the item price electronically at checkout. Among participating manufacturers are Chicken of the Sea tuna, Ocean Spray juice drinks and Borden milk.

Fenyo said Kroger will broaden its program, using e-mails to alert customers that coupons for products they regularly buy are available online, and is in contact with other manufacturers about offering digital coupons for their products.

Matt Kemme, a P&G marketing manager, said the company sees good security and strong consumer targeting opportunities with the digital coupons and expects to expand its "eSavers" beyond the current test.

"It's very early, but we've been able to run the water through the pipes and from what we've seen, things are looking pretty good," Kemme said.